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THE DISTILLERY: Fairfax forces

Jotters examine the surprise appointment of Jack Cowin to the Fairfax board, while they also look to the path ahead after APA wins Hastings' bid approval.

Fairfax finds itself in its own headlines once again this morning, after its chairman, Roger Corbett, appointed Gina Rinehart confidant Jack Cowin to the publisher's board. The move raises questions about Cowin's independence and whether Corbett might be serving interests of his own, which commentators happily opine on. Jotters are also busy examining the Australian Competition and Consumer Commission's clearance of APA Group's takeover bid for Hastings — a decision that creates clear winners and losers.

But first, The Australian'sRichard Gluyas takes a hard line against Fairfax's chairman for describing the board's latest recruit as an independent.

"Any director affiliated with a substantial shareholder such as 14.9 per cent investor Gina Rinehart, who has shown bigger designs on Fairfax, can't meet the test of true independence. Cowin has been a friend of Rinehart for decades, and recently acted as a mediator between Corbett and the iron ore billionaire over her stalled bid for three board seats. Rinehart wanted the position of deputy chairman and a further board seat, on top of Cowin's appointment as an independent director. In those fraught negotiations, Cowin likened his role to the 'Henry Kissinger of shuttle diplomacy'."

Meanwhile, Fairfax's Adele Ferguson points out that Corbett might have had his own reasons to make the appointment.

"With Cowin now inside the tent, it might herald the beginning of a thawing of relations between the board and Rinehart, who laid the gauntlet down to chairman Roger Corbett earlier this month to effectively increase the share price of the company to 87 cents before the annual meeting and improve paid circulation or agree to retire. Fairfax's shares are trading at 56 cents a share. The AGM is only a few months away and Corbett has a snowflake's chance in hell of getting the share price anywhere near 87 cents, which could make for an ugly AGM."

The Australian Financial Review's Chanticleer columnist, Tony Boyd, says the ACCC's clearance of APA's takeover ambitions for Hastings puts the suitor, which is also bidding against Pipeline Partners Australia, in a win-win situation.

"The ACCC approval, which will force APA to sell HDUF’s Moomba to Adelaide Pipeline System (MAPS), means McCormack is now free to lift his cash and scrip bid for HDUF. If he lifts the APA bid enough to make it superior to the rival offer from Pipeline Partners Australia at $2.325 for each security, then APA will be entitled to do due diligence on HDUF. … That is an important hurdle to jump because it means McCormack can get a firsthand look at the MAPS asset, which UBS analysts say is worth $400 million.The alternative to a higher cash offer is for McCormack to simply roll over, accept defeat and accept the existing PPA offer for his 21 per cent stake in HDUF. That stake is worth about $250 million. Acceptance of the PPA offer would generate a profit of about $100 million. That would be a big prize for taking second place in a takeover battle."

On the other hand, The Australian'sBryan Frith spots what could be a big-name loser in the likely event of a Hastings bidding war.

"Westpac owns 8.1 per cent of HDF and it was disclosed last Friday that it intended to accept the PPA offer. But it was not until Tuesday, when PPA lodged a substantial shareholding notice that it was revealed Westpac had undertaken to sell to PPA without reserving the right to accept a superior offer. … Westpac took that action knowing that the ACCC had advised that it would disclose by yesterday whether or not it intended to oppose the APA offer. Under the pre-bid acceptance deed, Westpac must accept within five business days of the posting of the PPA offer: that is, by next Friday. It's not a good look…"

In the same newspaper, John Durie examines another ACCC green light: NBN Co's $800 million deal with Optus, which would see the telco shut down its cable services. While the approval requires some "logical summersaults", Durie concludes that the ACCC made the right decision. Fairfax's Malcolm Maiden revives the glass half-full, glass half-empty conundrum in response to apparently upbeat housing starts data out of the US.

And paper-mate Michael Pascoe looks forward to China's September quarter growth figure, which, as a China watcher rather colourfully describes to him, "could be the most hotly awaited number in the history of the universe, or at least since the range of the Death Star's Planet Destroyer was calculated".

Elsewhere, The Australian'sDavid Uren backs claims by the local banking regulator that the small economic cost of tighter regulation will deliver insurance against a much more costly massive financial failure. And his colleague Tim Boreham searches for value in new updates from PanAust, Santos and Woodside.

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